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Jakarta Post

APEC told to join forces in building infrastructure

  • Satria Sambijantoro

    The Jakarta Post

Nusa Dua, Bali   /   Fri, October 4, 2013   /  12:13 pm

Members of the Asia-Pacific Economic Cooperation (APEC) should join forces in financing infrastructure projects within the 21 member states in order to be able to improve connectivity within the region.

'€œIn terms of regional infrastructure connectivity, every government has to have a stake in it,'€ Fang Fang, the vice chairman of investment banking in Asia with JPMorgan Chase, said in a seminar held on Thursday.

'€œIt should not be in the way of giving; it has to be '€˜I put in some money, you put in some money as well'€™. So, multilateral government participation is important,'€ he explained.

Fang admitted that he was baffled as to how the fast-growing APEC region had a multi trillion-dollar shortfall in infrastructure financing needs, while there were actually plenty of funds available in the global economy.

Fang was one of the speakers at a seminar entitled '€œConnectivity and Inclusive Growth in the Asia-Pacific'€ co-organized by the Boao Forum for Asia and the Pacific Economic Cooperation Council (PECC).

The seminar was held to identify possible policy actions and projects that could be adopted in 2014 when China takes up the chairmanship .
of APEC.

Infrastructure is a crucial issue in most developing countries in APEC, which currently accounts for 54 percent of world economic output.

Over the next decade, the Asian region alone will need to spend at least US$8 trillion on infrastructure projects to resolve bottlenecks and maintain growth at its current level, according to the Asian Development Bank (ADB).

There would potentially be a '€œspillover effect'€ for the APEC economies if there was progress in infrastructure building in the region, according to Christopher Findlay, a vice chairman of the Australian Pacific Economic Cooperation Committee.

'€œIf, for example, the Malaysians are making some terrific infrastructure reforms, and I do likewise, then I will be able to connect more efficiently with Malaysia and the supply chain there,'€ Findlay said.

In Indonesia, the poor state of infrastructure has been blamed as the major factor impeding economic growth.

The country'€™s lack of roads, ports and power plants have led to bottlenecks and economic inefficiency, which has ultimately deterred foreign investors.

Responding to the issue, President Susilo Bambang Yudhoyono has proposed a 7 percent increase in capital spending, or funds earmarked for infrastructure projects, amounting to Rp 206 trillion ($18.2 billion) in the 2014 State Budget.

The archipelago'€™s infrastructure needs could actually be supported by so-called public private partnerships (PPP), a form of cooperation between government and the private sector that has been touted as having a role to play in the government'€™s Rp 4,000 trillion infrastructure projects laid out in the Master Plan for Economic Expansion and Acceleration (MP3EI)

However, most of the infrastructure projects that have been selected for private partnership programs have been delayed due to the lack of foreign investor participation.

What has happened in the last 10 years is that Indonesia missed the opportunity and '€œlost its way'€ in inviting the private sector to invest in infrastructure projects, according to Conor McCoole, a managing director and head of project finance with Standard Chartered.

'€œPolicymakers don'€™t seem to be able to prioritize and assist the private sector to complete financing,'€ McCoole said, adding that financing was actually not an issue due to the availability of investors wanting to invest in infrastructure.

McCoole explained that the major factor deterring private sector investors from investing in infrastructure projects in developing countries was their lack of a centralized approach at the various levels of government.

'€œIn very few countries are there consistent, centralized, well-organized ministries for infrastructure,'€ he told participants in the discussion.

'€œI can'€™t actually think of one,'€ he added.

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